3 Reasons Why Home Buyers Who Missed $8,000 Tax Credit May Come Out Ahead

Home shoppers who missed the April 30 deadline for a housing tax credit might have the last laugh. For a variety of reasons, they could end up saving more than the $8,000 they could have received from the tax refund.

In some neighborhoods and price ranges, sellers are dropping their prices because buyers are harder to find now that the credit has expired. Builders and real estate companies began offering promotions after the tax credit ended that, in many cases, are worth more than the credit.

Interest rates have dropped enough since the credit deadline that, over the life of a loan, a homeowner could easily save more than the value of the credit. “I think some folks possibly could have benefited from waiting until after the tax credit,” said Joe Jackson, a real estate agent with Keller Williams Capital Partners. “It would depend on the price point they were buying in and the market they were looking in.”

Home sales leapt in March and April during the waning weeks of the credit, especially for homes priced at less than $200,000, which appealed to first-time home buyers. Since the credit expired, home contracts and building permits have tapered off, leaving sellers with fewer buyers and, in some cases, little choice but to cut their price.

Three reasons not to worry about missing the tax credit deadline:

1) According to real estate website Trulia.com, which tracks price reductions, 30% of Seattle area homes for sale on May 1 had reduced their asking price—more than in April or March. Buyers hope they can take advantage.

2) Those shopping for new homes are finding a different kind of bargain as some builders roll out incentives to keep traffic moving. Seattle area builders such as CamWest, Buchan, Quadrent Homes, Murray Franklin and more all have incentives including free upgrades, special interest rates and more that in many case are worth more than the $8,000 tax credit.

3) Finally, interest rates have dropped nearly half a point since the end of April, saving buyers thousands of dollars over the life of a loan. Buyers of a $180,000 home who borrowed $173,700 in mid-April at an interest rate of 5.125% would have paid $377,442 over the next 30 years—$15,000 more than they would pay if they borrowed last week at an interest rate of 4.75%.

“I know it’s not money in your pocket right away,” said Frank Hinkley, of Guild mortgage, “but the value of the interest rate today is really better than the tax credit.”